The Real Costs of Flexible Labour Markets
Neoclassical economics is built around static concepts of efficiency and welfare that can only be applied with great care to a dynamic and inherently imperfect world . And economists, including most neoclassical economists, have long understood that the fact that perfect competition yields an allocatively optimal outcome in the purely hypothetical world of perfect competition, does not mean that competition is always a spur to efficiency in the real world. But the neoliberal revolution that has engulfed the world over the past thirty years has consisted mainly of creating a climate in which the benefits of competition were confidently asserted under an ever widening range of circumstances. Indeed, in this new world, market solutions have become the default option, so that the onus of proof lies squarely with those arguing for market interference in the public interest. But in a complex, dy-namic and highly contentious world this is an almost unsupportable burden, since it is impossible to make a genuinely compelling case for intervention in such a world. Of course, it would be equally impossible to make a compelling case for market forces, but this fact is effectively obscured by such an asymmetrical – and deeply ideological – perspective.
As a result demands for the further empowerment of market actors are frequently asserted in the absence of good evidence to support the claims made on their behalf, with potentially serious consequences for the economy and for society. And the labour market is one area in which demands for the empowerment of market forces have been strong even though the supporting evidence has been weak and ambiguous. Moreover, if these demands for reform were not evidence driven, then it would be reasonable to assume that they were primarily driven by interests and ideology in which case one would not expect them to be deterred by contrary evidence. And that appears to be the case today as rising costs to labour and society in many countries are ignored, while those who benefit most from these policies seek to divide the losers by pitting the poor against the very poor, women against men, im-migrants against nationals, young against old. And for the moment they appear to have been rather successful, but we are a long way from the end of history.
Meanwhile the human, social and economic costs of neoliberal labour market reform have been large and are likely to grow, while the promised benefits have been fitful and extremely unevenly allocated. But the task of building an effective opposition to these policies, in the spirit of Polanyi’s «double movement» , has been hampered by a range of forces that have reduced the scope for social solidarity and state action at the level of the nation state but without creating any international power centre that could seriously address the task of protect labour or society against an excessive empowerment of market forces and market actors. But the costs are real and they are growing. And they are far larger and more threatening than has been fully understood by many of those currently celebrating their short term gains. Indeed, in time, these processes will generate contradictions that must eventually be resolved, though sometimes in ways that will threaten the very fabric of society.